Jase

Sun Microsystems: Burnout or Takeover Target?

It's almost impossible to decouple Java and other Sun initiatives from the technology framework that most relevant existing or emerging technical plays rely upon. They have a powerful, albeit subtle, influence on the entire technology ecosystem. The mobile arena (whether it be Apple's iPhone offering, RIM's Blackberry, or Nokia's product suite) all use Sun's technology. While this represents a very small fraction of Sun's revenue, it does result in a lock-in of ever- growing user base. And it's the best type of lock-in--the users aren't forced to be there--they simply prefer to be.

I've never been a big fan of hardware. Historically, the real money is in software. Still, their blade product offerings are growing fast, especially in emerging markets (60% of Sun's revenue is outside the US); they also received awards from DARPA for their research focused on microchip interconnectivity via on-chip optical networks enabled by Silicon photonics and proximity communication. This is a big deal for datacenter productivity, another huge growth area.

I should mention another point that few seem to be talking about: Sun bought back 300 million USD worth of their shares (at over $17/share) this quarter. Add that expense to the two big acquisitions (one of which was MySQL) and that might help explain why their earnings fell short this quarter. Sprinkle in a little "slowing US economy" drivel for good measure. There are a ton of initiatives and progress reports that will be shared at JavaOne (the conference starts in just a couple of days (Tuesday May 6th to 9th in San Fran). Personally, I feel that Sun's restructuring/turnarou... is taking shape fairly well, they've had some measurable improvements over the past four five quarters. The sell off on Friday was just a crankypants tired-ass market punishing Sun for making them wait, people have been holding their stock anticipating a turnaround for a long while. Sun wasn't particularly attractive at $23/share, at $12/$13 per share however, it's a bargain.